why is it so difficult for established companies to pull off the new growth that business model innovation can bring? 2 reasons;
- lack of definition, very little formal study has been done into the dynamics and processes of BMI
- few companies understand their business model well enough, so they don’t know when they can leverage their core business and when success requires a new business model
according to the paper ‘reinventing your business model’, what four interlocking elements does a business model consist of, when taken together they create and deliver value?
- customer value proposition - a way to help customers get an important job done (perfectly)
- profit formula - the blueprint that defines how the company creates value for itself while providing value to the customer
- key resources - required to deliver the value proposition to the targeted audience
- key processes - operational and managerial processes allow them to deliver value in a way they can successfully repeat and increase in scale
what does the profit formula consist of? 4 parts:
- revenue model - price x volume
- cost structure
- margin model - contribution needed from each transaction to achieve profits
- resource velocity - how fast we need to turn over inventory, assets, and overall how well we need to utilize resources, to support our expected volume and achieve our anticipated profits
name examples of key resources;
assets such as people, technology, products, facilities, equipment, channels, and brand
name examples of key processes
recurring tasks as training, development, manufacturing, budgeting, planning, sales and service
or a company’s rules, metrics, and norms
what is the most important attribute of a customer value proposition?
its precision; how perfectly it nails the customer job to be done
why is it useful to focus on the value proposition and profit formula first when building a new business model?
because it makes clear how resources and processes need to interrelate
what five strategic circumstances do often require business model change?
- when trying to address a large group of potential customers who are shut out of a market because existing solutions are too expensive / complicated
- when capitalizing on a brand-new technology by wrapping a new business model around it (or bringing technology to whole new market)
- when bringing a job-to-be-done focus where one does not yet exist
- the need to fend off low-end disruptors
- the need to respond to a shifting basis of competition
what does the article recommend companies to be patient for and what does it recommend to be impatient for
- patient for growth (to allow market opportunity to unfold)
- impatient for profit ( as an early validation that the model works)
